Analysis by Peter Roberts
The stock market has not always been a friend to Australia’s manufacturers, especially to young companies which have yet to display a strong track record of growth and profits.
In the past investors have run from such companies at the first sign of a hiccup, with the result either business failure or takeover from overseas.
But during this Covid-19 pandemic things are proving somewhat different, with large manufacturers well able to shore up their balance sheets with new cash, as much as $1.1 billion in the case of hearing implant manufacturer, Cochlear.
Partly this is to do with the poor financial returns on offer elsewhere – property is in a downturn and interest rates are at a historic low.
But perhaps investors are prepared to look at manufacturers again as something that can grow in these difficult times.
Even innovative young manufacturers are finding that the stock market is prepared to support their plans – if they have a clear pathway forward to the market.
In the past 10 days two very different companies found little difficulty in closing what are, for them, big capital raisings.
Defence technology group XTEK completed a raising of $11.4 million through an over-subscribed placement to investors and a share purchase plan for existing shareholders.
XTEK uses its proprietary XTclave production equipment (pictured) to make ballistic armour in Adelaide, with the raising funding a new production centre in the United States.
Then bone healing company Osteopore raised $8.5 million in a placement to expand production of its 3D printed bone scaffolds (pictured, below) used to aid bone regeneration.
The company has appointed a US distributor which requires increased production.
The key with both these companies is that they are not ‘gunna’ companies with big plans but few runs on the board.
In both cases they have something unique about their product offerings that gives them a potential market advantage.
But further, they have products approved and selling, and a clear path ahead of growth in sales.
The lesson is, don’t get caught in a global pandemic as a start up with big plans but little to show for it.
Pictures: Main:XTEK/XTclave, and Osteopore
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